GST Council To Review 28% Tax On Casinos, Online Gaming In Six Months

The GST Council decided to review the 28% tax on casinos, online gaming, and other forms of gambling six months after it goes into effect during a meeting that Finance Minister Nirmala Sitharaman presided over. The implementation of the tax is to take place in October.

Several states, namely Chhattisgarh, West Bengal, Karnataka, Bihar, Uttar Pradesh, Himachal Pradesh, Maharashtra, and Gujarat, were in favour of levying the tax at the earliest, the Finance Minister said on Wednesday. However, Delhi, Goa and Sikkim sought a reconsideration of the move.

She said there were practical difficulties in implementing a tax on each game. However, the collective wisdom of the GST Council prevailed in terms of implementing a 28% tax on the face value of bets placed on a platform, according to her.

The Council clarified that the valuation of tax should be based on the amount payable to the supplier by the player (excluding the amount entered into games/bets out of winnings of previous games/bets).

This means that the value of tax will not be based on the total value of each bet placed, but on the total amount that the player has paid or deposited with the supplier.

However, according to Sudipta Bhattacharjee, partner at Khaitan and Co., this clarification will provide some relief to the online real money gaming sector, but many smaller startups in this segment may still be badly hit by the higher GST. Some of them might possibly be affected even before the expiry of the review period of six months, she said.

The GST Council recommended amendments to the CGST Act, 2017, and IGST Act, 2017, to provide clarity on the taxation of supplies in casinos, horse racing and online gaming.

The amendments include clarifying that the supply of these services will be considered as an "entertainment service" and will be taxed at 28%.

A specific provision would also be inserted in the IGST Act, 2017, to provide for liability on not paying GST on supplying online gaming services to a person in India by those suppliers who are located outside.

Additionally, a simplified registration scheme for suppliers located outside India would be introduced.

A provision for blocking of public access to the supply of online gaming by an offshore supplier would be introduced, in case of failure to comply with registration and payment of tax.

Shedding light on the problem with the 28% tax rate, Bhattacharjee said that the tax is being levied at a value that is much higher than the actual revenue earned by the online gaming platforms.

Previously, the GST Council, in its 50th meeting, had agreed to levy a 28% tax on online gaming, casinos, and horse racing. The tax was to be levied on the full face value of bets placed on a platform, which would be the total amount of money wagered.